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Luxury Retailers Urge Government to Reconsider Tourist Tax to Avoid Loss of American Shoppers
British luxury goods retailers are appealing to the government to eliminate VAT on purchases made by tourists, warning that failure to do so could result in wealthy American shoppers opting for continental European destinations to avoid tariffs on high-end items. Industry leaders express concern that without a policy change regarding the current ‘tourist tax‘, these valuable customers may choose Paris and Milan over London for their luxury spending.
Fears of Shifting Tourist Spending to Europe
Concerns are mounting among UK retailers that high-spending tourists may bypass London in favor of cities like Paris and Milan if the government does not reassess its stance on tax-free shopping. This appeal comes as businesses grapple with the consequences of the abolished VAT refunds for international visitors.
Brian Duffy, CEO of Watches Of Switzerland, a prominent UK-listed retailer with a market capitalization of £849 million, whose portfolio includes prestigious brands like Omega, endorsed by Cindy Crawford and Kaia Gerber, has voiced strong concerns.
Impact on Luxury Goods Market
‘Even prior to tariffs, the price of luxury goods was already elevated in the United States compared to Europe, and Americans are naturally drawn to value,’ Duffy stated. He cautioned that his company’s UK operations, and the broader British luxury retail sector, risk missing out on a ‘fair share’ of tourist expenditure unless the Treasury re-evaluates the tourist tax policy.
Watches Of Switzerland’s UK Operations
Despite recently inaugurating one of the largest Rolex boutiques in Europe on London’s prestigious Bond Street, Watches Of Switzerland announced plans last week to shutter a number of UK showrooms, highlighting the current challenges faced by the sector.
Economic Analysis of Tourist Tax Impact
According to estimates from the Centre for Economics and Business Research (CEBR), the Treasury has experienced a significant shortfall of £11 billion annually in revenue since the cessation of tax-free shopping for tourists in 2021. This figure underscores the potential economic benefits of reinstating VAT refunds for tourists.
Industry Body Highlights Economic Contribution of Tourists
Helen Brocklebank, head of Walpole, a trade body representing luxury goods businesses, emphasized the broader economic impact of high-value tourism. ‘For every £1 spent by high-value visitors, £8 positively impacts the wider UK economy,’ she noted, illustrating the substantial multiplier effect of tourist spending.